The Future of Crypto Exchanges: Decentralization Is Coming

An estimated 99 percent of trading volume flows through centralized exchanges.

Custodial exchanges act as managers of their customers' crypto wallets.

The most popular crypto exchanges are all custodial - Coinbase, Bitfinex, Gemini, etc.

Custodial exchanges such as Coinbase manage user assets through an internal ledger.

The concerns over custodial exchanges have prompted many to push for the use of decentralized exchanges.

"I'm almost certain we will see a top 25 crypto exchange fail or be shut down in the coming months. This will be the catalyst for the emergence of decentralized exchanges and this is a key theme I'm expecting in 2018.".

Because non-custodial exchanges are still centralized, their internal mechanics are not transparent.

On paper, DEXs are a perfect solution for the concerns raised by centralized exchanges.

Peter Smith, CEO of Blockchain, argues that allowing centralized exchanges to do what they are good at - support, compliance, and banking - while moving private keys back into the hands of customers, would "Drive value for [the] entire industry."

If customer awareness of privacy and security continues to grow, we may witness more custodial exchanges offering hybrid solutions as well.